Supply chain concentration and firm resilience: do political ties and board interlocks matter?

Purpose Supply chain concentration (SC concentration) is a key aspect of supply chain structure and a determinant of a firm's resilience to external disruptions. However, previous research on how SC concentration affects firm resilience has been inconclusive. This study investigates the nuances of this relationship by examining the moderating effects of political ties and board interlocks. Design/methodology/approach We used both cross-sectional and panel designs to test the hypotheses. Our main analysis is conducted on a cross-sectional sample of 3,745 publicly listed Chinese companies during the COVID-19 pandemic. For a robustness check, we test the hypotheses using a panel dataset of Chinese firms from 2007 to 2022. We also interviewed managers at two Chinese manufacturing firms to understand the mechanisms underlying the theorized relationships. Findings We find that both supplier and customer concentration are detrimental to firm resilience. Specifically, firms with high SC concentration experience greater firm value losses and take longer to recover following the COVID-19 outbreak. Furthermore, firms can leverage social capital with external parties to mitigate such effects. We find that the impact of supplier and customer concentration is weaker for firms with strong political ties and high levels of board interlocks. The results are robust across alternative measures and research designs. Originality/value These findings extend prior research by identifying key dimensions of social capital – specifically, political ties and board interlocks – that mitigate the negative impact of SC concentration on firm resilience.